Once upon a time, there was a kingdom known as the Philippine National Police. It was a vassal kingdom of the greater empire known as the Department of Interior and Local Government.The kingdom of the PNP was also known as the kingdom of darkness. It operated in a grey twilight. In that twilight zone, men in black, wearing black sunglasses, strutted around the landscape, signing contracts that ran to hundreds of millions and even billions of pesos. The money came from the labor of peasants, who occasionally gawked at these black squires as they emerged from their fortified castle, riding steeds that galloped across that evil land.
The castle bore a name, emblazoned just after the moat. The name of the castle was: The Arrogance of Power. It served as the matrix of malice in a land that God had forsaken.
But one day, the Senate, which possessed the power, made a decision to let the sunlight into the grey kingdom. And the sunlight poured forth; and the people were amazed, and many exclaimed: How great and good the sunshine is; now let the black clouds dissipate.
Mr. President, ladies and gentlemen of the Philippine Senate:
I challenge the DILG secretary, the DILG undersecretary for the interior, and the highest-ranked officials of the Philippine National Police to explain, why the PNP has entered into so-called “supplemental agreements” that amended previous contracts, thus rendering the entire transaction grossly disadvantageous to the government, in violation of Republic Act No. 3019, also known as the Anti-Graft and Corrupt Practices Act.
I refer to at least two contracts:
1. One contract involving the sum of P307,441,521.26 signed with Armaments Unlimited, Inc. in 1998; and
2. Another contract involving the sum of P15,673,863.00 signed with BH Pelaez Enterprises in 1996.FIRST: THE P307 MILLION CONTRACT.
It appears that on 22 January 1998, a document was executed between the PNP and Fabrica D’Armi Pietro Beretta S.P.A. with business address at 25063 Gardone V.T. Brescia-Italia, represented in the Philippines by Armaments Unlimited, Inc. thru Mr. Edgar V. Lucas, general manager, with business address at Suite 204, 2nd Flr., AFP-GIC Bldg., Boni Serrano cor. EDSA, Camp Aguinaldo, Q.C. I shall here refer to the supplier as Armaments.
The document calls itself “Contract for the purchase of brand-new caliber 9mm pistol (DAO) (Bid Proposal NR O-0897-07).” The signatories are Santiago Aliño, acting PNP chief; and Edgar Lucas, general manager of Armaments. It was approved by Robert Barbers as DILG secretary and Napolcom chair.
The contract is straightforward. Armaments agreed to supply 38,989 pistols made in Italy; and PNP agreed to pay the sum, in round figures of P307 million, excluding duties and taxes.
What is noteworthy about this standard supply contract is that Article 2 titled “Price” includes the following standard provision: “The price is a fixed amount which shall not be affected by any future changes/fluctuations in the peso-to-dollar exchange rate.”
Another noteworthy feature of the contract is found in Article 4, titled “Place and period of delivery.” It includes the following provision: “The PNP can unilaterally cancel the PO/Contract once the items are not completely delivered within the stipulated delivery period.”
Now we come to the irregularity. Notwithstanding that the original contract provided that the price “shall not be affected by any future changes or fluctuations in the peso-to-dollar exchange rate,” the PNP deliberately reneged on its own contract, in order to favor the supplier!
On 5 February 1998, the Armaments general manager wrote a letter to the chairperson of the PNP Prequalification, Bids, and Awards Committee, which I shall here refer to as the Bidding Committee. The general manager, Mr. Lucas, requested that for the same price, the number of pistols to be delivered should be reduced from 38,989 to only 32,000 pieces.
The basis for the request was “the unpredictable fluctuation of our exchange rate.” I have to emphasize that the basis for the request was precisely prohibited by the terms of the original contract.
And yet, notwithstanding the contractual prohibition, the National Police Commission issued Resolution No. 98-096, titled “Approving request of PNP suppliers/dealers for price escalation.” The Napolcom resolution was approved on 2 April 1998. It was signed by all the Napolcom commissioners at that time, led by Epimaco Velasco as DILG secretary and Napolcom chair.
Throwing caution to the wind, the Napolcom proceeded to amend the original contract. On 15 May 1998, the Bidding Committee passed a resolution providing “that the contracts covering the above-cited purchase orders be amended through supplemental agreements.” This resolution was approved by Epimaco Velasco as DILG secretary and Napolcom chair.
Accordingly, also on the same date, 15 May 1998, the corresponding supplemental agreement was signed by the original signatories, and approved by Secretary Velasco. The original contract provided for the delivery of 38,989 pistols at a price of some P307 million. The supplemental agreement provided for the delivery of 32,000 pistols for the same price of P307 million. Thus, the contract was grossly disadvantageous to the government, because the government in effect lost some 7,000 pistols.
And that is not all. It appears that on 26 October 1998, the COA inspectors submitted a written report, after conducting inspection and verification of the shipment of pistols from Italy. Instead of delivering the already reduced number of 32,000 pistols as provided under the supplemental agreement, Armaments delivered even less than the reduced number. Armaments delivered only 29,364 pistols.
The end result is that the government lost the sum of P75,896,397.50. This sum was arrived at, as follows: The original stipulated quantity is 39,989. The actual delivery was only 29,364. Each pistol was priced at P7,885.34. If we multiply the unit price by the number of undelivered pieces, then we arrive at the sum, in round figures, of P76 million, which represents the pecuniary loss to the Philippine government.
SECOND: THE P16 MILLION CONTRACT.
The second, similar contract is grossly disadvantageous to the government because the terms of the original contract were amended by a so-called “supplemental agreement.” Again, the supplemental agreement is a direct violation of the terms of the original contract.
It appears that on 19 December 1996, a contract was executed between the PNP and the Smith and Wesson USA, represented by BH Pelaez Enterprises, which I shall here refer to as Pelaez. The contract provided for the delivery of 41,297 pairs of brand-new, double lock handcuffs, for a payment of P15,673,863. The handcuffs were priced at P379.54 per pair.
The Pelaez contract, like the Armaments contract, is a standard contract. It also includes the standard provision:
“This is a fixed price and shall not be affected by future peso-to-dollar exchange rates.”
The Pelaez contract specified the delivery as “inclusive of customs duties and taxes and VAT.” Pursuing an irregular pattern of behavior, the PNP amended the original contract, by means of two supplemental agreements.
The first supplemental agreement was signed by the former DILG secretary and the former PNP chief, who have since left office. The second supplemental agreement, which is reportedly undated, was signed by the incumbent PNP chief and DILG secretary Ronaldo Puno, in his then capacity as undersecretary.
It appears that the first supplemental agreement amended the contract, by reducing the quantity from 41,297 handcuffs to 31,262 handcuffs, while maintaining the contract price. It also appears that the second supplemental agreement amended the contract, so that instead of providing for a delivery “inclusive of customs duties, taxes and VAT,” it now provides for a delivery “exclusive of customs duties, taxes and VAT.”
GROSS DISADVANTAGE TO THE GOVERNMENT.
The Armaments transaction, because of underdelivery, represents a loss to the government of some P76 million. The Pelaez transaction represents a similar financial loss to the government, in an amount that I have been unable to compute, because the documents given to me do not indicate the amount of the customs duties, taxes, and VAT.
I humbly submit that prima facie, these two supplemental agreements are grossly disadvantageous to the government. Hence, there is probable cause to believe that the public officials who signed and approved them are criminally liable under the Anti-Graft and Corrupt Practices Act, which provides:
SEC. 3. Corrupt practices of public officers. In addition to acts or omissions of public officers already penalized by existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful:
(g) entering, on behalf of the government, into any contract or transaction manifestly and grossly disadvantageous to the same, whether or not the public officer profited or will profit thereby.
The following are the legal grounds for a prima facie case of corrupt practice:
1. VIOLATION OF CIVIL CODE.
In both cases, the supplemental agreement is prohibited by the Civil
Code, which provides:ART. 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of the payment, unless there is an agreement to the contrary.
In both cases, did the original contract include a price adjustment clause? Clearly, the answer is no. On the contrary, in both cases, the original contract included the following provision: “The price is a fixed amount which shall not be affected by any future changes/fluctuations in the peso-to-dollar exchange rate.”
Hence, under the Civil Code, it was illegal for the PNP -- specifically, former Secretary Epimaco Velasco, and incumbent Secretary Ronaldo Puno -- to approve a supplemental agreement. Since in both cases, the supplemental agreement resulted in a gross disadvantage to the government, prima facie, both men, as well as their subordinates, are liable under the Anti-Graft Act.
2. VIOLATION OF CONCEPT OF PUBLIC BIDDING.
It is true that contracts may be amended, upon agreement between the parties. However, there are certain contracts that, by their very nature, can no longer be amended. One of these exceptional contracts is a contract or a purchase order that is a result of public bidding.
I will now quote from an expert, Prof. Confessor Doria, former legal counsel of the Department of General Services. She states:
1) Contracts may be modified or amended upon agreement of the parties, with certain exceptions:
a) Public bidding is a limitation of the power to amend contracts. Where competitive bidding is a legal requirement before a government contract may be validly entered into, the due execution of the contract after such bidding is a limitation upon the right of the contracting parties to alter or amend it without public bidding, otherwise what would a public bidding be good for, if after execution of the contract the parties may alter or amend the contract or even cancel it at their will.
b) Modification of contracts after it had been awarded thru public bidding, is admittedly ultra vires and cannot be allowed (1) because such modification serves to nullify the effects of public bidding and whatever benefits and advantages the government had secured, (2) they result in manifest injustice to other bidders, (3) because the public interest may suffer as a result thereby.
2) Contracts may be modified or amended, among others, as follows:
(b) Reduction of Quantity - This is done in writing if acceptable to the requisitioner and government will not be prejudiced. Neither also can the government increase the quantity without acceptance of the contractor.
3) . . . . For an amendment to a government contract to be valid, therefore, the test is whether or not there was any benefit to be derived by the government, otherwise the amendment is invalid.
3. VIOLATION OF EXECUTIVE ORDER NO. 30, S. 1996.
In the Armaments case, the irregular Napolcom resolution justified itself by citing Executive Order No. 302, series 1996, and the NEDA implementing rules and regulations. The controversial NEDA rule provides:
Types of Contracts. As a general rule, the procurement of goods by the Government shall be based on a fixed price contract and no price adjustments/escalation shall be allowed. However, in cases where, as determined by the government implementing agency concerned, uncertainties involved in the performance of the contract are of such magnitude that the cost is too difficult to estimate with reasonable certainty and use of a fixed-price contract may seriously affect a manufacturer/supplier distributor’s financial stability or result in payments by the Government of contingencies that never occurred, types of contracts other than those based on a fixed-price basis may be used or, alternatively, the Agency concerned may provide price adjustment/escalation.
I humbly submit that the Napolcom interpretation of the NEDA rule is erroneous, and that it was error for Napolcom to change the terms of the original contract. The NEDA rule allows two types of contracts:
1. A contract that does not use a fixed-price basis; or
2. A contract on a fixed-price basis, but with a price adjustment clause or an escalation clause.Both the Armaments and Pelaez contracts used a fixed-price basis. Therefore, under the NEDA rule, it could no longer be changed, unless the contract provided for a price adjustment clause. The Armaments and Pelaez contracts had no such price adjustment clauses. Therefore, even under the NEDA rule, it was illegal to change the terms of the contract. The illegality became criminal, when the change in the terms of the contract resulted in a gross disadvantage to the government.
PERSONAL NOTE.
In a series of radio interviews this morning, I was consistently asked what the effect of these two privilege speeches might be on my husband. The speeches are directed against the DILG secretary, and my husband is a DILG undersecretary. Parenthetically, my husband was clueless yesterday that I was going to deliver a privilege speech against his boss. After I had dictated the speech, out of courtesy, I so informed my husband. He inquired if I could postpone the speech, and I said no. That is his entire participation on the matter.
Contrary to the expressed speculation of some, my husband is not my source. There are two reasons why he cannot be the source. The first reason is, he is the undersecretary for local government, with jurisdiction over governors, mayors, and other local executives. There is another person occupying the post of undersecretary for interior, with jurisdiction over the police. Thus, my husband has no jurisdiction over, and therefore no bureaucratic access to, the documents in my possession.
The second reason is, that my husband as undersecretary holds office in a building outside of, and a distance from, Camp Crame, where both the DILG secretary and the undersecretary for the interior hold office. My husband holds office at the Francisco Gold Condominium along Kamias St. near the Kamuning district. Camp Crame, where the PNP headquarters is located, is along EDSA near the Greenhills district. Thus, my husband is outside of the paper flow, and therefore has no physical access to PNP documents.
Also parenthetically, Roberto Lastimoso, the PNP chief currently on leave, is my relative by affinity. He is the husband of my niece in the second degree, with whom I am close. Since he is my own relative, known to me personally, I would have wanted to defend the PNP chief. However, I abstained, out of ethical considerations. Moreover, I have full faith and confidence that my relative, testifying only as to the truth, will eventually be proved innocent of wrongdoing. And so I leave him to defend himself, for the truth needs no defense.
But for me, this malicious talk of family ties is entirely trivial and irrelevant. I now reply to my hecklers, as follows: First, I challenge my critics to respond to the issue, and not resort to personalities as a diversionary tactic. The issue is straightforward: Were the contracts grossly disadvantageous to the government? And if they are grossly disadvantageous, why did the DILG and PNP officials sign and approve them?
What was the spirit that seized them to sign contracts onerous to their own government, whose interest they are pledged to protect? What were the enticements offered by these private corporate firms, that could have possibly beclouded the judgment of these DILG and PNP officials, so as to induce them to ignore the prohibitions of law?
I say to my critics: Answer the question! The public officials concerned will have their day in court before the Senate Blue Ribbon Committee. If you have nothing to fear, then you should rejoice that these contracts -- so much whispered about in Camp Crame itself -- have been brought to light. But on the other hand, if you are guilty, as I suspect you are, I say this: Let justice be done, and let the heavens fall.Huwag ninyong subukang pakialaman ang asawa ko, na walang kamalay-malay dito. Pag sinubukan nyo, pakikialaman ko rin ang asawa at mga kapatid ninyo. Trabaho ko ito bilang senador, at hindi dapat ang personalan. Pero kung yon ang hilig nyo, handa ako, at matira ang matibay!
For six years, as an opposition senator with an electoral protest pending in the Supreme Court against the incumbent president, I suffered the heavens to fall on my head. I did not whine or whimper, trusting only that my arguments on the issue, presented within my obvious limitations, would lead to the truth, and the truth would set our people free.
For six years, defenseless and helpless against an almighty incumbent administration that stole the presidency from me by means of electoral fraud perpetuated by the notorious Sulo Hotel Operations Group, I stood my ground under siege, refused to surrender to torment and despair, and confronted my accusers face to face. I argued my case to the best of my humble ability, and prayed to my God, the God of justice, to uphold the truth.
That is what I suggest the DILG and PNP officials should do. Allow me to humbly propose that having observed their nefarious operations for six years, I consider myself prepared, should they once more choose to hire media hacks to engage in unconscionable character assassination by innuendo, while their employer pretends to be unknowing and innocent. Fight like men, not like subterranean creatures of some dark, and dead universe.
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The Isulong Team: Isulong SEOPh, Isulong Seoph by Benj, Pinoy Isulong by Seoph Martinez and Useless Isulong